IT powerhouse IBM (IBM 2.35%) reported second-quarter results on Tuesday night. Operations in the so-called strategic-imperatives category showed solid sales growth, led by mobility and cloud-computing products and services. Here's what you need to know about IBM's results.

IBM's second-quarter results: The raw numbers


Q2 2017

Q2 2016

Year-Over-Year Change


$19.3 billion

$20.2 billion


Free Cash Flow

$2.6 billion

$2.2 billion


Net income

$2.3 billion

$2.5 billion


GAAP Earnings per share (diluted)




Data source: IBM.

What happened with IBM this quarter?

  • Revenues from IBM's strategic imperatives rose 5% year over year, landing at $8.8 billion. This umbrella term for IBM's cloud-computing, mobility, social networks, security, and data-analytics businesses now covers about 46% of the company's total quarterly sales. Strategic imperatives account for 43% of revenues on a trailing basis, which shows that the emphasis on these operations is picking up steam.
  • Within the strategic imperatives, mobile sales rose 27% year over year and cloud-computing revenues jumped 15% higher.
  • All five of IBM's reportable business segments reported declining sales, ranging from a 2.2% decline in the global-financing division to a 10.4% sales drop in the systems segment.
  • The fact that all of IBM's business segments can show falling sales while all of the strategic imperatives deliver solid growth underscores how quickly the company's legacy operations are falling out of favor. This wholesale-strategy shift is both smart and unstoppable.
Rows of server systems, under a blue sky and several clouds.

Image source: Getty Images.

What management had to say

"We finished the first half of the year where we expected, including continued strong free cash flow generation," said IBM's CFO, Martin Schroeter, in a prepared statement. "This allowed us to continue our strong R&D investment levels and return more than $5 billion to shareholders through dividends and gross share repurchases during the first half."

There were no surprises here, in other words. Instead of updating its financial guidance, IBM simply reiterated its full-year targets of at least $11.95 of GAAP earnings per share and free cash flows of approximately $13 billion.

Looking ahead

Management also claimed to have reinforced IBM's position as a leader in enterprise cloud computing during the quarter. Emerging growth drivers include the Watson artificial-intelligence platform, a commitment to strong end-to-end encryption for all data on IBM's mainframe systems, and a portfolio of Blockchain tools.

The conversion from a one-stop computing shop to a boutique provider of cloud-computing and data-analytics services is starting to pay off here, but IBM still has a long way to go.